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hello mike, this question, the first long adjustment (i) regarding replacement plant.
the solution states
13100
8000
2500
10000
(500)
(3000)
2400 (balance figure)
_____
32500
_____i want to why didn’t they include depreciation arising from 2 leases, that plant that was acquired for 5 million plus 3 million enviromental provision, i understand 3 million is long term liabililty but should not 5 mil be depreciated over 10 years?
As Plant was obtained on start of the year, why not include (500) in above calculation for dep?Also the other plant acquired on lease of Fair value 10 mil.. Should not it also be depreciated over 4 years (lease term) and then multiply by 6/12 as its obtained mid-year.
Can you clarify really pretty please? i m unable to understand this aspect of cashflows
Ok, figure by figure:
13,100 is the brought forward figure
8,000 is the 5,000 + the environmental provision of 3,000 which has to be capitalised
2,500 is the amount of the revaluation. The figure of 2,000 in the Revaluation reserve per the question is the net amount AFTER the transfer to Revaluation Reserve of the 20% deferred tax from the Deferred Tax account relating to the deferred tax on the revaluation gain
10,000 is the fair value of the leased plant acquired under finance lease
500 is the carrying value of the plant which was disposed of during the year
3,000 is the depreciation for the year and INCLUDES depreciation on the finance leased plant, and ….
2,400 is the figure for acquisitions to arrive at the closing balance of 32,500
OK?
Thank you 🙂 my bad i thought 3000 dep does not include the revalued asset’s dep
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